Although a conservative approach has been the traditional route that most retired investors take, many wonder what level of conservatism is appropriate. This week’s digest covers why an overly conservative portfolio in retirement may not be the best fit for everyone.
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How Much Should You Have in Equities Until Retirement? |
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By Jerome Clark
For many retirees, running out of money is their biggest worry during their retirement years, ranking above terminal illness or even death. Unfortunately, many of the popular asset allocation strategies suggest going overly conservative once you reach retirement. While this may limit your downside, you are also severely limiting the upside of a portfolio that may need to sustain you for decades. This article suggests that staying aggressive in retirement is preferable.
Some of the topics covered in the article include:
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Comparison of different allocation approaches
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Impact of allocation on long-term investing
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When greater equity exposure is more appropriate for investors
Retirees today face a challenging conundrum: How to invest in retirement with enough risk to maintain your purchasing power for 30-plus years while not taking so much risk that you leave yourself exposed to volatility. Although a conservative approach has long been advocated for in retirement, be sure to consider the level of conservatism that is right for you.
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Living off Retirement Savings in a World of Uncertain Return Patterns |
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By AAII Staff
The general assumption is that retirees should become more conservative in their asset allocation. However, what exactly does it mean to become more conservative? There is more than one way of being conservative, and an understanding of this concern might help you in your own asset allocation process and in the assumptions you are using to determine how much to withdraw each year in retirement.
Some of the topics covered in the article include:
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The variety of approaches to being conservative and what they mean
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Spending rates: the annuitization approach
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The problem of periodic withdrawals
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Other ways to be “conservative” when you are living off your retirement income
Your asset allocation should take into account your own tolerance for risk, based on the amount of loss you can stomach without abandoning your plan. Be sure to review your circumstances annually to make sure that your assumptions are in line with reality.
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Member Question
Which investing profile best fits your portfolio allocation approach?
A) Aggressive
B) Moderate
C) Conservative
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Be sure to vote on this week’s question for the opportunity to offer your insights on our open-ended question. |
Previous Question’s Results
Do you use economic indicators or other specific metrics to monitor risk levels in the economy?
Yes : 51%
No : 49%
Poll results are as of 9 a.m. (Central) on Monday. 1,824 respondents.
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AAII Survey: How Members Evaluate Economic Risks |
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Economic indicators help investors and analysts assess investment opportunities or entire economies as a whole. From gross domestic products (GDPs) to consumer price indexes (CPIs), there are a number of data points that can help investors predict changes in a country’s economy and strategically adjust their portfolios. More » |
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Compare Mutual Funds on AAII.com |
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 Once you’ve settled on your asset allocation, get help choosing funds for your retirement portfolio with AAII’s new Compare tool. At the redesigned Funds area on AAII.com, simply type in two or more mutual fund tickers, click on Compare and see how the funds stack up against each other on returns over various time periods, risk, expenses and other essential criteria. AAII’s unique A–F grades are employed for many of the stats, making it quick and easy to see which fund comes out on top. Go to www.aaii.com/funds to get started. More » |
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